What are Indices?
One of the many assets that binary options traders can invest in, are stock indices. If you have not read anything about these indexes before, then you probably have no idea what they are and how their value is calculated.
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In this part of our tutorial you will learn about types of stock indices. In short, a stock index represents the performance of some of the largest companies listed on a country’s stock exchange. If these companies are performing well, then the value of the index will increase and vice versa.
Some of the most commonly traded indices
• Dow Jones (DJ30; US)
• S&P500 (US)
• NASDAQ (US)
• DAX (Dax30; Germany)
• CAC40 (France)
• FTSE100 (UK)
• ISE30 (Turkey)
• RTS (Russia)
• TADWUL (Saudi Arabia)
• BOMBAY SE (India)
• Hang Seng (Hong Kong)
• SSE180 (Shanghai)
• Straits Times (Singapore)
• KL Future (Malaysia)
• ASX (Australia)
• IBEX35 (Spain)
• NIFTY (India)
• SMI (Switzerland)
• Nikkei 225 (Japan)
• Tel Aviv 25 (Israel)
• TOPIX (Japan)
• IMKB 30 (Turkey)
• BOVESPA (Brazil)
• MICEX10 (Russia)
As you can see, each stock index represents a nation.
Keep in mind that depending on the broker’s services which you are using, you may have access to a limited number of stock indices.
Trading Indices with Binary Options
Trading indices will probably confuse many of you right from the start, but as soon as you get familiar with the specifics of these assets, you will see that they are not as complicated as they seem. Although some traders despise indices, most experts support the view that adding a couple of indices to a trader’s portfolio will not have an adverse influence on its performance.
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Of course, you need to prepare a sturdy trading strategy before investing in index binaries.
Traditional index trading can be very expensive, so retail traders rarely have a chance to try it. However, this is not the case with index binary options and you will not be in need of that lot of money in order to start trading.
The average return rates, offered for index binary options are 70-80%, but they can be higher or lower, depending on the broker you have chosen and the type of binary options you are trading.
Stock indices are not that difficult to operate with, but you must be prepared to work hard if you want to turn trading indices binary options in a long-term and profitable undertaking.
What you must remember about stock indices is that they are a bit different from other assets. As you already know, the Forex market is open 24/7, but this does not apply to stock indices. The indices of different nations have specific working hours (in most cases, from early morning to the afternoon).
This is why it is recommended to trade stock index options that fit your time zone. This way you will be able to trade during your waking hours and you will not have to stay up late in order to do your job.
In the next three articles of our tutorial, we will discuss three of the most popular stock indices – S&P 500, FTSE 100 and Dow Jones Industrial Average.